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Case ECS 02/15: North Macedonia / electricity

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summary of the case

registered:

ex officio 2015

The amendments to the Energy Law adopted in October 2014 deprive small businesses and all household customers of their right to purchase electricity directly from the supplier of their choice. Furthermore, making eligibility dependent on electricity consumption is non-compliant with the Treaty.

Protecting customers from dramatic price increases is a legitimate aim that could be achieved through measures which are significantly less market distorting and in compliance with the Energy Community acquis. Eligibility has to be distinguished from price regulation and universal service provision might necessitate regulating the prices for certain categories of customers. The Secretariat is ready to assist North Macedonia in rectifying the identified breaches of Energy Community law.

On 14 October 2016, the Ministerial Council decided on the failure by North Macedonia to comply with its obligations under with Article 11 of the Treaty in conjunction with Article 33 (1) of Directive 2009/72/EC. With the adoption of Decision 2016/06/MC-EnC, the procedure under Article 91 of the Treaty in Case ECS-2/15 is closed. On 12 October 2017, the Secretariat initiated Case ECS-2/15S by submitting a Reasoned Request to the Ministerial Council under Article 92 of the Treaty.

Case ECS 02/15 information requests

procedural history

On 30 January 2015, the Secretariat sent an Opening Letter to North Macedonia for its failure to comply with the Energy Community’s eligibility rules by postponing full opening of the electricity market. The Energy Community Treaty sets 1 January 2008 as the implementation deadline for market opening for non-household customers and 1 January 2015 for all customers including households. The postponement until 2020 of full market liberalisation represents a severe breach of the Treaty.

Procedure

According to Articles 6 and 16 of the Rules of Procedure for Dispute Settlement, interested parties may be granted access to the case file and may submit written observations on the present case to the Secretariat within one month from 30 January 2015.

Having taken into account the Government’s reply to the Opening Letter, the Secretariat maintains its findings made therein. In the Reasoned Opinion, it reiterates its view that by depriving a number of non-household customers and all household customers from exercising their right to purchase electricity directly from the supplier of their choice and by obliging them to continue purchasing electricity from the incumbent supplier as a supplier of last resort after 1 January 2015, North Macedonia fails to comply with Article 33 Directive 2009/72/EC read in conjunction with Annex I of the Treaty.

Reasoning

The Government justifies the postponement of the opening of the market for over 12 years beyond the deadlines set in the acquis by a risk of “possible drastic increase of the prices of electricity for the households.” In reality, the argument related to potential “price shocks” seems to address rather the intended protection of the incumbent’s liquidity than the protection of household customers from “price shocks”. The amendments to the Energy Law are based on the presumption that all small non-household customers would immediately switch to a supplier different than the incumbent supplier EVN, which would leave the latter supplying electricity only to households, the regulated price for which is currently below market price. This measure is essentially protectionist in nature as it has the effect of shielding the incumbent supplier from any actual or potential competition by prolonging its legal supply monopoly for a significant period of time.

The Secretariat submits that in case the liquidity of the incumbent who supplies electricity to final customers at prices regulated by ERC was indeed at risk, this problem should have been addressed by reviewing the level of regulated prices, to make sure they reflect the full costs of electricity, and allow for a reasonable profit margin. On the contrary, the Government and ERC created the purported problem of an abrupt price increase for small non-household and household customers in case of compliance with the Treaty’s deadlines by years of inertia in terms of deregulation of prices.

Protecting customers from dramatic price increases and ensuring security of supply is a legitimate aim that could be achieved through measures which are significantly less market distorting and in compliance with the Energy Community acquis. The Government seems to ignore that Contracting Parties can avail themselves of the possibility to impose public service obligations – including regulation of retail prices for non-household and household customers – on suppliers, in a manner compliant with the Treaty rather than depriving Macedonian customers from the rights granted to them under the Treaty.

Procedure

A Reasoned Opinion is the second step in a dispute settlement procedure initiated by the Secretariat under Article 90 of the Energy Community Treaty. Depending on the Government's reply, the Secretariat may submit the case to the Ministerial Council for a decision on North Macedonia’s compliance with Energy Community law.

North Macedonia is now requested to rectify the identified issues of non-compliance within a time limit of two months.

After carrying out a preliminary procedure, the Secretariat submitted a Reasoned Request on North Macedonia’s failure to comply with the Energy Community’s rules on eligibility (Article 33(1) of Directive 2009/72/EC as adapted by Ministerial Council Decision 2011/02/MC-EnC) by postponing full opening of the electricity market.

After having considered the Opinion by the Advisory Committee, which upheld the Reasoned Request, the 14th Ministerial Council took a decision on the failure by North Macedonia to comply with certain obligations under the Treaty. The Ministerial Council declared the existence of a breach by this Contracting Party of its obligations to ensure that the customers eligible for the purchase of electricity from the supplier of their choice comprise all non-household and household customers. This North Macedonia fails to comply with its obligations under Article 33(1) of Directive 2009/72/EC, as adapted by Ministerial Council Decision 2011/02/MC-EnC.

In Article 2 of the Decision, the ministers urge North Macedonia to "take all appropriate measures to rectify the breaches identified in Article 1 and ensure compliance with Energy Community law, in cooperation with the Secretariat immediately".

Procedure

North Macedonia is asked to report to the Secretariat about the measures taken. The ministers invited the Secretariat to initiate a procedure under Article 92 of the Treaty if the breaches are not rectified.

On 14 October 2016, the Ministerial Council decided on the failure by North Macedonia to comply with its obligations under with Article 11 of the Treaty in conjunction with Article 33 (1) of Directive 2009/72/EC. With the adoption of Decision 2016/06/MC-EnC, the procedure under Article 91 of the Treaty in Case ECS-2/15 is closed.

On 12 October 2017, the Secretariat initiated Case ECS-2/15S by submitting a Reasoned Request to the Ministerial Council under Article 92 of the Treaty.